"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." ~ George Soros

Monthly Archives: September 2014

Let me share to you one of the most important conversations in “Reminiscences of a Stock Operator”, which depicts the difference between the pros and the amateurs

Elmer: “Mr. Partridge, I have just sold my Climax Motors. My people say the market is entitled to a reaction and that I’ll be able to buy it back cheaper. So you’d better do likewise. That is, if you’ve still got yours.”

Turkey: “Yes, Mr. Harwood, I still have it. Of course!”

Elmer: “Well, now is the time to take your profit and get in again on the next dip,” said Elmer, “I have just sold every share I owned!”

Turkey: “It did, and I am much obliged to you, my dear boy. But I couldn’t think of selling that stock.”

Elmer: “Why not?”

Turkey: “Why, this is a bull market!”
(The old fellow said it as though he had given a detailed explanation.)

Elmer: “I know this is a bull market as well as you do. But you’d better slip them that stock of yours and buy it back on the reaction. You might as well reduce the cost to yourself.”

Turkey: “My dear boy, if I sold that stock now I’d lose my position; and then where would I be? And when you are as old as I am and you’ve been through as many booms and panics as I have, you’ll know that to lose your position is something nobody can afford; not even John D. Rockefeller. I hope the stock reacts and that you will be able to repurchase your line at a substantial concession, sir. But I myself can only trade in accordance with the experience of many years. I paid a high price for it and I don’t feel like throwing away a second tuition fee. But I am as much obliged to you as if I had the money in the bank. It’s a bull market, you know.”

Here’s an example: $PIP one of the solid growth stocks during 2012. from 2.00 went as high as 6.88. I remember back then most of the technical / fundamental analysts only saw this going at 4.00-4.50, after that they thought it was expensive or too high already.

Do you seriously think that after consolidating for 4-years, a stock will just go for a mere 20%-30% move?

Most traders are so eager to make a quick buck. People label themselves as a “TRADER” thinking they have to trade all the time to make money. In reality, they OVER-TRADE just to feel the fulfillment, the excitement, the rush. They try to watch the market everyday looking for ways to make quick money. They seek to predict each tick and capture each spike, thus they react to every short term market gyration. They go in and out of their positions with very high frequency. They think they’re so smart for making a quick 5% punt…… only to see the stock they sold move further by another 30% sometimes even 50% to 100%. Then they start wishing for a retracement so that they can buyback.

Oh… the great old buy back THAT NEVER CAME. They only realize their mistake once the stock has made it’s big move– like a 50% to 100% trend up. People fail to realize that the biggest trades doesn’t require much effort nor force. It’s just a matter of being right, and sitting tight. (which is easy to say, but very hard to do.), Traders don’t have to fucking trade all-day. Problem is most of us do not aim for the BIG $$$Money. Many of us subliminally stay in the markets just to fill our psychological need for EXCITEMENT.

Remember, BIG moves take TIME to develop. It is quite ironic, but for me, one of the most important aspects of being successful in the market is to have the discipline and patience to stay away from the screens when the market is already going according to your flow. This means shrugging off all the impulse and the excitementthat you get from seeing the current premature profit your position is showing.

Most amateurs feel excited during trading, because they are acting on impulse. Pros rarely feel excitement, because they are acting on their SYSTEM. There is no emotional attachment to a single particular trade, each trade is just a statistic. Pros are not here for the thrill, they are here to MAKE MONEY–BIG MONEY.

There will be times where you’ll feel like a genius riding high fliers, getting ceiling plays and all, but you have to determine how to do this CONSISTENTLY.

Ask yourself, did you just get lucky? or can you identify high fliers in a consistent manner?

Tighter risk controls, specially if you don’t know what you’re doing.

Di araw-araw pasko. Always define how much risk you can take when taking these kinds of trades. When I have a basura that is not working based on my expectations I don’t hesitate to throw it away, even if it’s a 10% loss, after all it is GARBAGE, right?

Moving on. So why Gaming?When the general market looks weak, those who remain strong MUST BE REALLY STRONG.

$LR

This was one of the strongest names according to my system going into September. It detected MCP + BEL as well, which I have exposure as well in my other accounts. But I chose to be overweight $LR because it gave the strongest signals. Since I liked LR, I also accumulated $LRW for a more speculative play.

Earlier, I posted about $LR in my Shabu Analysis 2 (Check it out here), highlighting 8.40-8.50 as a critical range. It was sold down temporarily at 7.90-8.00, but then it rebounded quickly, and blasted its way past that resistance closing at 8.80 with huge demand on bid.

This kind of set-up is the forte of my system. Specially when most of the market is weak, that’s where you’ll see the outliers.

Anyway, that’s about it. I will stick to gaming and basuras for the mean time. I’ll only revert back to beta sectors once I see clear signals.

You might see me post charts from time to time but that is NOT an indication to BUY,remember that.

With all the information available in the internet, please do yourself a favor and always put in your own diligence before making a trading decision.

THE SHABU PORTFOLIO————————————

Sup! After being busy for the past few months, I’m now back in action. Before we start, let me just tell you bout some changes:

First.I am now focused full time into trading for myself and fund-management for clients. I can now move more actively and aggressively in the market if I choose to do so. Before, I could not play quick trades because I was so caught up with my job and other responsibilities.

Third.After spending several years in the SHABU LAB, I am now a more systematized trader.

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Let’s Begin.

Global equities are hovering around all-time high levels. If you read in my earlier posts, I was mostly bearish entering the year, but I didn’t let my opinions interfere with what the market was showing. Factoring in all the QE/money printing bull shit all around the world, one can get scared with all the excess. However, the craze is still on and markets all over the world are showing they ain’t scared.

You can say people are probably getting complacent, but as a trader we just follow the money and listen to what the market is saying.

Opinions won’t make you money, trading on the right side will.

This quote is very relevant nowadays since we have lots of people in social media sharing views, analysis, hypes, bull shits and what not. If you see a super comprehensive, logical, fundamentally sound analysis / opinion from a veteran, think twice before betting your balls.LEARN TO BE INDEPENDENT, always take responsibility for your trades.

At the end of the day the market dictates which views are relevant and which ones are trash.

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Even if I had a bearish view I was almost always 100% in terms of portfolio exposure, it did not matter to me since I was focusing on low-beta plays. I wasn’t able to ride market leaders DNL and NIKL, but I found other ways to make money. Since I thought that the index sucked, I focused on mining–which built up 50% of my portfoliobefore I started trimming on rallies.

Here’s a glimpse of my port on Aug. 13, 2014 (I have trimmed already at this point)

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Why the f*ck Mining?

Mining was clearly one of the leading sectors this year.

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Why AT, MARC and PX?

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$MARC

Since I wasn’t able to hold NIKL, I focused on its brothers. Many people were selling because of the suspension. Good thing my signals were telling me otherwise. I was overweight this with about 1/3 of my port. Again let me emphasize: Opinions won’t make you money.

I sold most of it at 6.80-7.20, before it crashed back to 6.00, I wasn’t able to buy back, so I bought $ORE instead LOL

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$AT

Sold 16.80-17.00

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$PX

Been accumulating this since 9+, then added on breakouts of 10-11. if you look at my port my avg price would be high already since I tripled my size at 11+, because it looked like a high probability 12. It did go there, and I threw most at 12.50 on the way down.

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As for MWC

Since I was mainly bearish, I didn’t want high-beta names. I stuck with this for 5 months. Sold at 29.50 downwards. Good thing it’s now back to 28!!! wooo! I almost thought it would breakout of 30.

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These were the main plays of the Shabu Portfolio that made me money in the month of August.

Again, I was trading the whole year with a bearish view, but because my signals were telling me otherwise… I looked for ways where I could get exposure to strong names that had stories of their own or had low correlation to the common shit that fundies hold.

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August was a generous month. I am quite thankful that the SHABU PORTFOLIO is at ytd highs, and is currently doing more than double my benchmark’s performance. I have also beaten my 2012 ytd, considering that I’m trading a bigger size now–not bad.

September may be more challenging.. yet more interesting. I saw something that made me decide to implement a different approach moving towards the “ber” months.

From time to time, I’ll be posting my view on stocks that I find interesting. Please note that these stocks have already been filtered in my “Shabu Screening Program”. I have back tested my program since 1969 and I can say that I have a 69% hitrate.I don’t care if I miss, I just throw it out and cut immediately and move on to the next play.I won’t post any buy signals, or any technical indicators, rather I’ll just highlight certain Shabu Levels–ranges that help me determine my buying/selling decisions. Kanya kanyang diskarte na yan. It’s up to you how you look at the chart.

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Here’s this weeks highlights:

LR

Gaming leaders SINO + BLOOM have emerged already. I think this baby is next in line. I think gaming will be a strong theme moving towards the latter months of the year. Watch MCP + BEL too.

3-year down trend broken, likely to break 8.40-8.50, then move forward to 9-10.

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PAL

RSA sold it for twice the amount he paid for during 2012. (bought 49% at $500m, sold at $1B). Coincidentally, it has been on a slump since RSA bought in. What will happen now that he’s out of the picture. Let’s see how the market reacts.

CEB holding its solid trend, I think it’s time for Airlines to shine. OIL prices continue to weaken. Many factors why airlines are now gaining interest.

2 year + down trend broken, hovering at 6.00, bound to tackle 6.50, then 7.00 then HEAVEN

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ORE

Kinda lagging among the nickel miners NIKL + MARC + CMT, but for those who want catch up in the Nickel Craze, you can check this out.

Broke its 2.40 resistance. You saw how it flew to 2.90 awhile ago. Seems like this still has potential, all depending on how the big boys handle the ride. A convincing breakout of the 3.00 level will definitely make things more interesting.